(Bloomberg) -- As they close the books on another busy summer, Hamptons restaurants and other businesses are wrestling with a problem that will carry into the next: how to keep staff close at hand in one of the world’s most expensive real estate markets.
“I pay this year over $90,000 for housing for employees,” said Scott Rubenstein, owner of East Hampton event and entertainment venue ClubHouse. “I can’t keep spending this kind of money. At some point, something’s got to give.”
Kirby Marcantonio thinks he has a solution. Just north of the Montauk Highway, across the street from East Hampton brunch spot Moby’s, the 72-year-old publisher of Hampton Life and Montauk Life magazines hopes to build a workforce housing complex where employers can buy units for prices ranging up to $850,000 for three bedrooms.
Marcantonio, who grew up in East Hampton, says a novel approach is needed to ease a worker housing crisis that’s been festering for decades. “We’ve now had this issue in our laps for 40 years,” he said.
Several of the region’s biggest restaurant groups, including Apollo Global Management Inc. co-founder Marc Rowan’s Alchemy Hospitality and Nick & Toni’s operator Honest Man Hospitality, have lined up behind Marcantonio’s proposal for the long-vacant site at 350 Pantigo Road, which is zoned for affordable housing. But his focus on the needs of employers has also garnered political pushback, stirring debate over whom such projects are meant to benefit.
The average Hamptons home now costs nearly $3.3 million, up more than 40% from a year ago, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Restaurant owners say the challenge of housing workers has reached a breaking point. Mark Smith, Honest Man’s chief executive officer, said housing costs have gotten so out of hand that he’s building a four-bedroom house to accommodate his executive and sous chefs.
Steve Kalimnios, co-owner of the Montauk Lake Club, who’s also backing Marcantonio’s plan, said he pays his line chefs more than $100,000 a year, roughly 70% more than they’d make elsewhere on Long Island, largely to offset the cost of housing in the Hamptons.
Such businesses say Marcantonio’s plan would give them greater flexibility than traditional affordable-housing projects. At one of the latter, soon-to-open Green at Gardiner’s Point, a one-bedroom apartment can be rented for $1,500 a month, roughly half of the market rate. But a single person must earn less than $65,640 to qualify, and units are allocated by lottery.
Marcantonio, who acquired the Pantigo Road site in April for $5 million, will need town board approval for many aspects of his plan. A skeptical initial reaction in July has already prompted him to make significant changes.
At the July board meeting, one of the five members suggested employers might fill Marcantonio’s units with TikTokers promoting their restaurants and hotels.
‘Adversarial Relationship’
“Do we want a company that has social influencers to have affordable employer-sponsored housing and house their people to have summer fun in the Hamptons?” asked Council Member Ian Calder-Piedmonte. “Probably not.”
Council Member Tom Flight said he was worried about introducing a “pay-for-play element” to affordable housing.
“Whoever is the highest bidder is going to be the one who can provide housing,” said Flight. “Is that necessarily going to provide essential services to the town?”
Marcantonio said he wasn’t surprised by the reaction. “There’s a very adversarial relationship between the town’s regulatory side and many of its businesses and even some of its citizens,” he said.
He said board members asked him prior to the July meeting if his plan was being bankrolled by Rowan, who’s been engaged in a yearslong legal battle with East Hampton over expanding his waterfront Duryea’s restaurant in Montauk. Marcantonio recently felt the need to publicly deny that the billionaire was an investor.
Rowan Rumors
“There was early suspicion that the only people who are going to be behind this would be big and rich,” said Marcantonio.
Rowan declined to comment for this story. Alchemy also owns Lulu Kitchen & Bar in Sag Harbor and another Duryea’s on the North Fork.
East Hampton Town Supervisor Kathee Burke-Gonzalez didn’t respond to a request for comment on Marcantonio’s characterization. But she said in an interview that affordable housing was needed, pointing out that, despite its glitzy image, East Hampton has the highest poverty rate in New York’s Suffolk County,
“There are folks that are paying half their income or more in order to live here,” Burke-Gonzalez said.
In an Aug. 16 memo, Marcantonio responded to criticism by offering to set aside half of the 48 units in his proposed development for sale to health care employers. Another 30% would be allocated to local school districts, the police department and the town itself.
That would leave just a fifth of the units for private businesses, though they would also be eligible to buy any units not purchased by public or health care employers.
In an interview, Flight said Marcantonio’s proposed allocation was a step in the right direction. He said that private employers had more options than public ones and had already been buying up old motels in the area to house their seasonal workers.
“They can do that, and they can charge their clients more,” he said.
But Flight said schools and municipal employers would likely find it “challenging” to purchase units. He said he expected the project to be discussed further at an upcoming board meeting.
‘Bigger Scale’
Marcantonio said he was seeking to preempt further criticism of his project. “We finally decided internally that we had to just stamp this out,” he said.
Along with concerns about its employer focus, Marcantonio’s proposal is also likely to face the usual opposition over parking, traffic and resource constraints.
Rachel Fee, executive director of the advocacy group New York Housing Conference, said Marcantonio’s business backing may help in that regard.
“It’s great that the employers are also putting pressure to try to solve the problem,” she said, “but, it has to be more than one project.”
That’s a hope shared by Marcantonio and his supporters, who envision the Pantigo Road project becoming a model for the East End and beyond. He says he’s already in early talks about a similar development in Southampton.
“We can replicate this, we think, in other places perhaps, even on a bigger scale,” Marcantonio said. “That’s where we’ll really make some good money.”
--With assistance from Nacha Cattan.
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